Search Results
Working Paper
Local Projections
A central question in applied research is to estimate the effect of an exogenous intervention or shock on an outcome. The intervention can affect the outcome and controls on impact and over time. Moreover, there can be subsequent feedback between outcomes, controls and the intervention. Many of these interactions can be untangled using local projections. This method’s simplicity makes it a convenient and versatile tool in the empiricist’s kit, one that is generalizable to complex settings. This article reviews the state-of-the art for the practitioner, discusses best practices and ...
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Micro Responses to Macro Shocks
We study panel data regression models when the shocks of interest are aggregate and possibly small relative to idiosyncratic noise. This speaks to a large empirical literature that targets impulse responses via panel local projections. We show how to interpret the estimated coefficients when units have heterogeneous responses and how to obtain valid standard errors and confidence intervals. A simple recipe leads to robust inference: including lags as controls and then clustering at the time level. This strategy is valid under general error dynamics and uniformly over the degree of ...
Working Paper
Analysis of Multiple Long Run Relations in Panel Data Models with Applications to Financial Ratios
This paper provides a new methodology for the analysis of multiple long-run relations in panel data models where the cross-section dimension, n, is large relative to the time-series dimension, T. For panel data models with large n, researchers have focused on panels with a single long-run relationship. The main difficulty has been to eliminate short-run dynamics without generating significant uncertainty for identification of the long run. We overcome this problem by using non-overlapping sub-sample time averages as deviations from their full-sample counterpart and estimating the number of ...
Working Paper
Estimating Taxable Income Responses with Elasticity Heterogeneity
We extend a standard taxable income model with its typical functional-form assumptions to account for nonlinear budget sets. We propose a new method to estimate taxable income elasticity that is more policy relevant than the typically estimated elasticity based on linearized budget sets. Using U.S. data from the NBER tax panel for 1979-1990 and differencing methods, we estimate an elasticity of 0.75 for taxable income and 0.20 for broad income. These estimates are higher than those obtained by specifications based on linearization. Our approach offers a new way to address the problem of ...
Working Paper
Analysis of Multiple Long Run Relations in Panel Data Models with Applications to Financial Ratios
This paper provides a new methodology for the analysis of multiple long-run relations in panel data models where the cross-section dimension, n, is large relative to the time-series dimension, T. For panel data models with large n, researchers have focused on panels with a single long-run relationship. The main difficulty has been to eliminate short-run dynamics without generating significant uncertainty for identification of the long run. We overcome this problem by using non-overlapping sub-sample time averages as deviations from their full-sample counterpart and estimating the number of ...
Journal Article
Where Do the Wealthiest Get Their Wealth?
An analysis using data from Norway identifies the top 0.1% of wealth accumulators and then traces how their wealth evolved from their 20s to their 50s.
Working Paper
Climate Change and the Geography of the U.S. Economy
This paper examines how the spatial distribution of people and jobs in the United States has been and will be impacted by climate change. Using novel county-level weather data from 1951 to 2020, we estimate the longer-run effects of climate on local population, employment, wages, and house prices using a panel polynomial distributed lag (PDL) model. This model and the long historical data help capture important aspects of local climate changes, such as trends in temperature. The historical results point to long-lasting negative effects of extreme temperatures on each of the outcomes examined. ...
Report
Approximating Grouped Fixed Effects Estimation via Fuzzy Clustering Regression
We propose a new, computationally-efficient way to approximate the “grouped fixed-effects” (GFE) estimator of Bonhomme and Manresa (2015), which estimates grouped patterns of unobserved heterogeneity. To do so, we generalize the fuzzy C-means objective to regression settings. As the regularization parameter m approaches 1, the fuzzy clustering objective converges to the GFE objective; moreover, we recast this objective as a standard Generalized Method of Moments problem. We replicate the empirical results of Bonhomme and Manresa (2015) and show that our estimator delivers almost identical ...